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Viral V. Acharya, C.V. Starr Professor of Economics at New York University’s Stern School of Business and a former deputy governor of the Reserve Bank of India, speaks with Global Finance about the fallout of the coronavirus epidemic.

Emerging Markets: India

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The US government has committed $2.45 billion for Indian borrowers through the US Export-Import Bank’s India Infrastructure Facility. Funds will be used for medium- and long-term dollar loans for infrastructure projects and the purchase of capital goods.

In an unexpected move, the Indian finance ministry has issued new short-term bills. Cash-management bills (CMBs) will have a maturity of shorter than 91 days and will be issued as needed, the ministry says. The shortest maturity for Indian treasury bills had been 91 days. Finance secretary Ashok Chawla says the bills provide the government with greater flexibility to manage short-term funding mismatches, while analysts believe CMBs will reduce yield curve volatility. The announcement came shortly after the government unveiled a $94 billion borrowing program to plug the 6.8% fiscal gap projected for 2009-2010, but authorities say CMBs will not be used to fund the deficit.

Despite growing concerns over a serious drought affecting several states, finance minister Pranab Mukherjee says India’s economy remains on track for more than 6% growth during the current fiscal year. Mukherjee’s outlook is supported by a hefty 7.8% industrial expansion in June, the fastest pace in 16 months. Goldman Sachs is similarly optimistic, predicting a 5.8% GDP expansion for the fiscal year. The nation’s economy slowed to a still-healthy 6.7% growth rate during the last fiscal year, following a five-year growth average closer to 9%.